WASHINGTON (AP) – Employees whose companies switch from traditional pension plans to an increasingly adopted alternative generally lose benefits, congressional auditors have found.

The report by Congress’ Government Accountability Office, released Friday, adds to the debate over the nation’s private pension system. For months, lawmakers have been grappling with an overhaul of the rules governing company pension plans as a number of big companies dump their troubled plans on the financially strapped federal agency that insures them.

Democratic lawmakers, who last year asked the GAO to examine the matter, seized on the report as fresh evidence that the so-called cash balance pension plans hurt workers. Under the plans, companies set aside money each year for employees with a guarantee that it will grow at a specific rate – unlike traditional pension plans, which promise workers a specific monthly benefit.

With cash balance plans, employees generally receive one lump-sum payment when they retire or leave the company.

Critics of the plans maintain that they unfairly discriminate against older workers.

Many companies, including IBM and AT&T, have converted from traditional defined-benefit pension plans to cash balance plans in the last 15 years, and employees have taken some of the companies to court over it.

The GAO auditors, who examined 31 large company pension plans and 102 smaller ones, found that when employers switch from defined-benefit pension plans to cash balance plans, “most workers, regardless of age, would have received greater benefits under the (defined-benefit) plan.”

Also, unless older employees are given the right to remain in the traditional plan, they “experience a greater loss of expected benefits than younger workers,” the report says.

About half the companies converting to cash balance plans allowed all employees or older ones to remain in the defined-benefit plan, the GAO found.

The agency said its analysis “illustrates one of the difficult choices facing the Congress in crafting comprehensive … pension reform legislation.

Democrats want to mandate protections for employees whose companies convert to cash balance plans.

The GAO study “is further proof of the need to stop companies from slashing the pension benefits of older workers through cash balance schemes,” Rep. Bernie Sanders, I-Vt., said Friday in a statement.

Business groups have urged lawmakers to mandate that companies already using cash balance plans cannot be challenged. Companies that have converted to the plans are mainly in manufacturing, health care and finance.

Rep. John Boehner, R-Ohio, chairman of the House Committee on Education and the Workforce, has supported the idea of cash balance plans, saying they are beneficial to workers because they are portable and secure.

“Cash balance plans represent an increasingly vital component of worker retirement security, providing nearly 10 million workers the promise of a sound retirement,” Boehner wrote in a letter Thursday to his House colleagues.

“Indeed, cash balance plans provide more generous benefits for the majority of workers than do traditional plans, have proven far better-suited to meet the challenges of an increasingly mobile 21st century workforce, and most importantly, provide a safe and reliable nest egg for an increasing number of American workers,” he wrote.

Boehner spokesman Steve Forde said Friday that Boehner had just received the GAO report and had no immediate comment.


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